Enfo group’s interim report 1 January – 31 March 2017 .

Key points of the interim report
• Turnover increased by 8.3% in January–March in accordance with the growth strategy and stood at EUR 34.6 (31.9) million. Growth is restricted by the availability of IT professionals in Sweden.
• Operating margin was EUR 0.9 (1.1) million in January–March. The decline mainly resulted from increased recruitment costs in Sweden.
• Operating profit (EBIT) decreased by 46.5% in January–March and stood at EUR -0.6 (-0.4) million. 
• Profit before taxes in January–March amounted to EUR -0.9 (-0.6) million. 
• Profit for the period decreased by 79.8% in January–March, to EUR -0.9 (-0.5) million. 
• Earnings per share in January–March were EUR -2.52 (-1.68). The earnings per share including discontinued operations were EUR 26.06 (-0.96). 
• Cash from operating activities in January–March stood at EUR -2.5 (0.1) million. 
• In January-March, Enfo Group employed an average of 972 people (859). At the end of March, the Group's continuing operations employed a total of 978 people (856). 
• At the beginning of February 2017, Enfo Oyj sold the entire share capital of its subsidiary Enfo Zender Oy, which provides communication services, to a Kuopio-based invoicing and payment monitoring services company, Ropo Capital. In connection with the sale of shares, an EUR 18.9 million profit from discontinued operations was recorded for the period under review.

Outlook for 2017
The Group's 2017 turnover from continuing operations is expected to grow. The Group's operating margin excluding non-recurring items from continuing operations is expected to remain on the level of 2016.

Risks and uncertainties
Short-term risks and uncertainties are associated with maintaining competitive prices in all of the Group’s business areas. Recruitment problems, particularly in the Stockholm area, may weaken the otherwise good growth prospects of the Business Solutions business area. In addition, the turnover and profitability of new business may develop weaker than planned.
The largest long-term uncertainties are associated with a decrease in demand for traditional IT services and the schedule for implementing changes as part of Enfo’s revised strategy. Non-recurring expenses related to strategy changes reduce the short-term profitability.

Arto Herranen, CEO:
During the period under review, there were no major changes in the general economic situation in Finland and Sweden.

Enfo Group’s turnover continued to follow a growth path, particularly due to the consolidation of e-man AB, a company specializing in integration solutions, which Enfo acquired in November 2016. Demand in the Business Solutions business area in Sweden is very strong. Meanwhile, the availability of competent IT professionals in Sweden is hampering the entire sector, and we are clearly behind our recruitment targets. As a result of this, we did not achieve our organic growth target. On the other hand, an exceptionally high staff turnover increases our recruitment costs, which in turn decreases profitability. Furthermore, price competition in traditional IT services and investments in new businesses reduced the operating profit compared to last year.

Enfo's aim is to enable digitalization for our customers through comprehensive, integrated business solutions and continuous IT services. We are true specialists in all of our areas of expertise, and work with the best partners to provide customers with business-oriented solutions.

In 2017, we will invest in services with great growth potential. Meanwhile, we will face profitability challenges in our traditional services. We will have to implement savings measures in order to achieve cost benefits. We will also take maximum advantage of automation in those functions where it is possible. The two-speed Enfo is the main theme of the current year: we are accelerating and braking at the same time.

Developments in Enfo’s business areas
We continue to see the market shift towards digitalization. Businesses and IT are moving closer to each other. At the same time, our discussions with customers are increasingly moving to a solution- and business-oriented direction. Enfo’s main business areas are IT Transformation, Consultancy/Business Solutions and Financial Process Services.

In the IT Transformation business area, customer field digitalization and disruption can be seen clearly, and customers’ need for a knowledgeable IT partner is significant. For a service provider like Enfo IT Transformation, the changing business environment is setting new kinds of demands. As a service provider, we need to be more agile than before, replace old competencies with new ones, invest in training and even accomplish specific changes in our company culture. During the past quarter, IT Transformation won new customers e.g. related to the new General Data Protection Regulation (GDPR) and renewed its existing contracts, for example with Are Oy.

In the Business Solutions business area, Enfo’s Digital Dimension market message has presented us with many opportunities as well as challenges. Our focus on the manufacturing sector has taken off well and we are now also starting to work more with companies within the service sector where we see the next wave of interesting opportunities. In the past quarter, Business Solutions won several important new customers in the digitalization domain. Even more importantly, we are working with our existing customer base in order to proactively support them in their initiatives. As a result of digitalization, we are seeing more and more predictive and data science requests coming up – one good example of this is the Coop customer insight project. Another area showing rapid growth is AppCare, which addresses customers with a fast application development track but with a need to make their apps a long-term solution; here AppCare can help secure uptime. Digitalization of business processes is also gaining ground quickly in the market, and we are seeing that in this area our concept All the Way to Value has a good fit with predefined best practice processes.

In January, the Financial Process Services business area completed the divestment of the information logistics business. The divestment has enabled Financial Process Services to fully focus its resources on the development of outsourcing services for medium-sized enterprises – an emerging market that is growing fast. During the past quarter, Financial Process Services signed two new customer agreements. Loiste outsourced its contract and energy management related business, including six highly competent energy business process specialists, to Enfo. The agreement extended Enfo’s services to cover Loiste’s back-end business processes from electricity meter information to invoicing. In addition, Keravan Energia signed a contract to renew and adopt Enfo’s Microsoft Dynamics based financial system as a service and to utilize Enfo’s best practice financial processes. Enfo Financial Process Services expects its net sales to grow by more than 50% compared to last year.

Timetable for financial reporting 2017
The interim report for Q2/2017 will be published on 25 August 2017 and Q3 on 26 October 2017.

Enfo’s Business
Enfo Oyj is the parent company of Enfo Group. Enfo is a Nordic IT service company offering business solutions, financial processes and managed IT services. Our passion is helping customers in the digital dimension by creating innovative digital solutions that develop, innovate and improve our customers’ business. Enfo group consists of 1.000 niched experts in Finland and Sweden.

Turnover and result
The Group’s turnover for continuing operations increased January–March in accordance with the growth strategy by 8,3% and stood at EUR 34.6 (31.9) million. The turnover was affected by the growing demand for services related to digitalization. In addition, in November 2016 acquired e-man AB which specializes in integration solutions increased the turnover. Enfo Group’s profitability for continuing operations was EUR -0,6 (-0,4) million comprising -1,6% of turnover.

The Group’s profit before taxes in January–March for continuing operations stood at EUR -0,9 (-0,6) million. The Groups financing costs in January-March were EUR 0.3 (0.3) million. The result in January-March including divested business was 18.0 (-0.1) million. Earnings per share in January – March for continuing operations was EUR -2.52 (-1.68). Earnings per share in January – March including divested business was EUR 26.06 (-0.96).

Financing, investments and acquisitions
Enfo’s net investments in January–September totalled EUR -0,1 (0,6) million. The company’s equity ratio was 48,8 % (42,0). Interest-bearing net liabilities at the end of March amounted to EUR 19,9 (30,1) million and net gearing was 30,8 % (58,9).

The sale of Enfo Oyj’s subsidiary, Enfo Zender, an information logistics services provider, to Ropo Capital was concluded on the 1st of February 2017.

Personnel
In January – March Enfo Group employed an average of 972 employees (859). At the end of March, the Group employed a total of 978 (856) people. During the review period, Enfo's personnel in Finland amounted in average to 373 (374) and in Sweden to 599 (485).

Shares
On 31 March 2017, Enfo Oyj had a total of 664,361 shares At the end of March the company had a total of 116 shareholders. The company has one series of shares. At the end of March 2017, Enfo owned 1,887 treasury shares. At the end of March 2017, the company’s ten largest shareholders were: Osuuskunta KPY, Ilmarinen Mutual Pension Insurance Company, Enfo Oyj’s Personnel Fund HR, Rongo Cap Oy, Keskisuomalainen Oyj, Einari Vidgrén Oy, Pohjois-Savon Osuuspankki, Hannu Isotalo Oy, Kallax Oy and Arto Herranen. Osuuskunta KPY holds 85.32% of Enfo's shares.

Annual General Meeting and administration
On 30 March 2016, Enfo Oyj’s Annual General Meeting decided, in accordance with the proposal of the Board of Directors that a dividend of EUR 0.99 per share is paid for the financial period 2016 and that the shareholders are paid an equity repayment of EUR 11.91 per share from the invested unre-stricted equity fund. Distributable dividend amounts to approximately 0.7 million euros and equity repayment to approximately 7.8 million euros, approximately 8.5 million euros in aggregate. In addition, the Annual General Meeting authorised the Board of Directors to decide in its discretion on the distribution of additional dividend as follows: The total amount of the distribution based on this authorization shall not exceed EUR 4.55 per share in dividend, approximately 3 million euros in aggregate. The authorization is valid until the opening of the next Annual General Meeting.

According to the proposal of the Nomination Committee, Lauri Kerman, Timo Kärkkäinen, Anssi Lehikoinen, Soili Mäkinen and Kaisa Olkkonen were re-appointed as members of the Board of Directors. Mikko Laine was selected as a new member.

At the organisation meeting held after the Annual General Meeting, the Board of Directors elected Anssi Lehikoinen as the Chairman.

The Annual General Meeting decided that the share premium reserve, being part of restricted equity, as set forth in the parent company's balance sheet as at 31 December 2016 shall be decreased by transferring all funds recorded therein, amounting to EUR 13 316 335.37, to the Company's invested un-restricted equity fund. In addition the AGM decided that the the other reserve, being part of unre-stricted equity, as set forth in the parent company's balance sheet as at 31 Decem-ber 2016 shall be decreased by transferring all funds recorded therein, amounting to EUR 11 755 792,51, to the Company's invested unrestricted equity fund.

The AGM authorised the Board of Directors to decide upon the issuance of new shares through a rights issue. The authorisation concerns the issuance of a maximum of 175,000 shares. Shares can be conveyed in order to obtain assets required in connection with a company or business acquisition. The Board of Directors decides on the subscription price and other terms and conditions of the share issue.

In addition, the Annual General Meeting authorised the Board of Directors to decide on conveying new or treasury shares through a directed rights issue. The authorisation applies to the assignation and/or issue of no more than 60,000 shares. Shares can also be conveyed and/or issued in order to finance or complete any business transactions, or as part of the company’s salary and incentive scheme for the company’s personnel and the personnel fund. The Board of Directors decides on the subscription price and other terms and conditions of the share issue.

Furthermore, the Board of Directors was authorized to decide on the acquisition of the company’s treasury shares using the company’s unrestricted equity. The authorisation applies to the acquisition of a maximum of 10,000 shares at a minimum share price of EUR 1.00 and a maximum share price of EUR 150. The shares can be purchased for use as consideration when the company acquires assets for its business operations, for any business acquisitions, as part of the company’s salary or incentive system, or in order to fulfil the company’s share repurchase commitments and for cancellation. The Board of Directors can decide upon the acquisition price and other acquisition terms. The authorisations are valid until the end of the next Annual General Meeting.

Accounting principles 
This financial statements bulletin has been prepared in accordance with the recognition and measurement principles of the International Financial Reporting Standards (IFRS) and the accounting principles published in the 2016 financial statements. The figures in the tables have been rounded to the nearest million euros and may not add up to exact totals. The figures presented in the tables are unaudited.

Additional Information:
CEO Arto Herranen
+358 44 7193 000

CFO Christian Homén
+358 40 750 6902